If you follow some simple steps, you can come up with a plan that meets everyone’s needs.
Method 1 – Determining Your Goals And Priorities
1. Get tax savings. Good estate planning requires you to have a specific goal in mind and have ordered priorities. This will help you develop the best plan for your situation. Estate planning can bring you certain tax savings. You can save money on your estate tax, gift tax, capital gains, generation-skipping, and inheritance tax. This can be a motivating factor for you to take the time to estate plan.
If you are interested in trying to save on estate taxes, you may consider opening a trust. Many trusts offer tax savings as well as some kind of control over the money even after your death.
2. Provide for your children. Protecting the future of your children can become especially important with blended families. This becomes more complicated when you add in additional children from your spouse. You may want to provide for your stepchildren as well as any children that you and your new spouse have together.
Ensuring that at least a portion of your estate passes to your children instead of your spouse may require a little planning and should be taken into consideration as you start the planning process.
3. Make provisions for your spouse. A common goal in estate planning is to ensure that a second or third spouse is taken care of. If you want to make sure that your spouse gets a portion of your estate, you will have to take this into consideration as you plan your estate.
A common misconception is that if you die without a Will, all of your estate passes to your spouse. The spouse will likely get a portion of it, but it usually gets divided between the spouse or domestic partner and the children of the deceased. However, each state has its own laws that dictate these decisions.
4. Consider your ex-spouse. You can choose to provide for an ex-spouse in your estate plan. This will depend on the length of the marriage and the relationship you still have with your ex-spouse. If you would like to provide for your ex-spouse, you must make clear provisions in your estate plan.
5. Protect beneficiaries. If you have a particular way you want the money you leave certain people in your life to be spent, you can set up a trust. A number of trusts can be setup to ensure that beneficiaries, who are those receiving the money, spend your money the way you want them to spend it. This also prevents them from mismanaging the amount, especially if it is a large sum.
For example, a trust can allow you to stipulate that your adult children only receive inheritance funds for educational purposes. You can also make the funds available only after they reach a certain age.
Method 2 – Updating Your Accounts
1. Understand the realities. Typically, if you remarry, you will no longer want to include your ex-spouse in your estate plans, at least not in the same capacity. However, many people inadvertently leave property to ex-spouses because their wills were not updated. This can be devastating to your family. If you do not change the beneficiary of your policies to your new spouse or a child, your ex-spouse will receive the proceeds, regardless of the status of your relationship.
In some rare cases, the court may order a spouse to keep the policy intact if it’s essentially a joint policy or may have one spouse maintain the policy for a minor child. Typically, whomever is the policy holder can change the beneficiaries however they want.
2. Change your beneficiaries. Once you remarry, you need to revisit each relevant policy that has a beneficiary and change it to either your new spouse or another family member. You should check all of your accounts and your vehicle titles to ensure that your ex-spouse is no longer listed as the beneficiary.
These accounts include life insurance policies, retirement accounts, savings and checking accounts, annuities, stocks, and savings bonds.
Keep in mind that some divorce decrees impose rules on maintaining life insurance policies for ex-spouses and children as a part of alimony or child support. If this applies to you, comply with the court order.
Instead of just changing the beneficiary on your insurance policy, you might consider getting a new policy all together to meet the needs of your family. You may have different needs than you had when you first obtained your policy. You want to make sure everyone is provided for exactly how you want them to be.GOT QUESTIONS… JUST CLICK HERE!
3. Close or re-title joint accounts. Once you remarry, you need to close or re-title any joint accounts to either you or your ex-spouse. This is necessary because when a joint account owner dies, the account automatically passes to the surviving joint owner, regardless of any heirs named in the decedent’s Will. To prevent an ex-spouse from receiving these assets, make sure that you close all of your joint accounts during the divorce.
For example, Sarah and Joe just got married, which is a second marriage for both. Sarah has an investment account, which still has her former husband, Brad, listed as the joint owner. Even if Sarah designates Joe as the sole beneficiary of her estate in her Will, the account owned by her and Brad will pass automatically to Brad when she dies.
Method 3 – Writing Documents To Divide Your Estate
1. Execute reciprocal Wills. You need to decide if you and your new spouse will execute reciprocal Wills. Reciprocal Wills are documents written by husband and wife that are exactly alike. This means that each Will leaves the same assets to the same person or people in the same proportion. This will make it less confusing or upsetting for all involved when someone dies.
For example, Sarah and Joe, each on a second marriage, are married to one another. They each have one child from a previous marriage. They both execute Wills which leave everything to the other, and in case the other is deceased, one-half of the estate goes to Sarah’s child and one-half goes to Joe’s child.
Keep in mind that when executing Reciprocal Wills, your spouse is free to change his Will at any time. For example, Sarah dies and Joe inherits the entire estate. He then may change his Will to leave the entire estate to his child, and disinherit Sarah’s child.
2. Mediate Non-Reciprocal Wills. When executing Non-Reciprocal Wills, you need to determine what assets belong to each of you. This will make it where there is no confusion about what property each party may leave to any heirs. Your spouse is not required to inform you of changes made to his Will, whether the Wills are reciprocal or not. Your spouse is free to change his will at any time and is under no obligation to inform you of the change.
This means that he may remove your children as beneficiaries and leave his entire estate to his own children, without your permission or knowledge.
If you experience any difficulty reaching an agreement concerning ownership of your property, a prenuptial agreement or your state’s marital property laws may dictate ownership of some or all of your property for you.
3. Determine who will inherit assets. When planning your estate, you need to decide who is going to be left which of your assets. You may wish to leave everything to your current spouse or your children, or you may wish to divide your assets between your spouse and children in some manner. There are many options for distributing your property upon your death, including various trusts and titling options. These can depend on your particular circumstances, the state where you live, and the size of your estate.
You may wish to consult with an attorney in order to determine what options are available and find the ones that will work best for your family.
4. Choose a personal representative. Once you have decided who will inherit your estate, you need to find a personal representative. Your personal representative will be responsible for ensuring that your Will is followed and your estate is handled in accordance with your wishes. She will also be responsible for collecting assets, obtaining property appraisals, opening an estate account, paying estate bills, keeping records for the estate heirs and the Court, and consulting with professionals such as attorneys, accountants, and real estate agents. There are many considerations you need to take into account when choosing the best, most impartial representative for your estate.
You might want to choose a non-family member who is not associated with either side of your blended family. This will ensure that she is not partial to one side of the family in case there are any complications with your estate.
You can also choose a friend or professional. This can be an attorney or asset manager at a bank. These individuals may be a good choice of personal representative for some families because they have no stake in your family affairs and are knowledgeable about money.
5. Execute your official documents. Once you have finished planning your estate, it is time to execute the official documents to reflect your wishes. The documentation of your estate plan may consist of one or more of documents such as a Will, a power of attorney, and a Living Will.
A Last Will and Testament, or a Will, is a legal document which specifies who shall inherit what portion of an estate upon the testator’s death. The testator is the person who executes the Will.
A power of attorney is a legal document which gives another party the authority to act on your behalf in financial or health care matters when you are not able.
A Living Will is a document which directs your family and doctors concerning your wishes regarding remaining alive on machines and receiving nutrition and hydration, should you need this type of care.